China's Geely to buy Lotus, take stake in Malaysia's Proton

Posted May 25, 2017

Along with the acquisition of Proton, the deal also includes Geely acquiring a 51% stake of Lotus from Proton. Volvo was revitalised on the back of $11 billion investment from Geely.

Geely and DRB-HICOM expect to sign a final deal in July.

This will follow regulatory and shareholder approval.

One of Britain's most historic automakers will soon be Chinese-owned.

"Re-rating is imminent with the stake sale removing DRB's largest overhang, as well as a more positive outlook for Proton", Citi said in a note late Wednesday.

"Our intention was always to ensure the revitalisation of the Proton nameplate", Syed Faisal said. "Our very own and much- loved brand now has a real chance of making a comeback - a huge one, I hope", Malaysia's Second Finance Minister Johari Abdul Ghani said at a press conference. Proton will be responsible for distribution of the brand in Malaysia.

He noted that Proton also lacks economies of scale to bring down their cost in order to remain competitive with ability to lower the selling price. But the negotiations fell through a few months of talks.

Geely, which owns Sweden's Volvo Car Group, will get a stronger presence in Southeast Asia. "It is a significant milestone for Proton and the country", he said. Starting from scratch would see a $2-billion cost to buy land, build a factory and train several thousand staff.

The French automaker saw Proton - the only full-fledged auto manufacturer in the region -as the way to short-circuit that laborious route. However, it has been struggling with falling sales in recent years.

Geely, one of the top Chinese automotive companies, saw its sales in China grew 50% a year ago to 766,000 vehicles. "We will have potential of half a million cars in Malaysian and ASEAN markets by working with Proton". The PSA Group had also been in the running to buy Proton.

Geely Holding is full of confidence for the future of Proton.

The car company also has a stalled assembly deal with local Iranian car company Zagros Khodro; however, since the local firm sold a majority stake to local car rental firm Azim Khodro no new vehicles have re-entered the market.

Protons were imported to South Africa by AMH between 2005 and 2015. "It will just be producing foreign cars in Malaysia".

Proton was founded in 1983 during an industrialization push of former prime minister Mahathir Mohamed. Its glory days peaked in 1993 at 74%.

An earlier attempt in 2007 to woo new partners for Proton foundered on the Malaysian government's refusal to allow foreign bidders to acquire control.

Its engineering division, which specializes in design and lightweight auto architecture, could prove especially useful to Geely as it seeks to expand its operations and expertise.